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« Bailout Halleleuiah: We Praise Maxine Waters For Finally Asking The Goldman Question (Video) | Main | The Great Unclog of 2009: Industrial Strength Drano, Anyone? »

No Need To Bailout Seeking Alpha: Discussion Of Bank Bondholders Vs. Taxpayers With Felix Salmon, Brad Delong, James Kwak (And The Daily Bail)

Credit to Seeking Alpha editor Mick Weinstein for organizing and hosting an outstanding discussion of Tim Geithner's banking rescue program (ppip) this afternoon.  It was a live discussion between the panelists, and in the 2nd portion the editor chose 7 questions from the writers and readers who were following.

Here is the panelist exchange with regard to my question.  It's mentioned twice because James Kwak brought it up before waiting for the moderator to introduce.



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Reader Comments (13)

Timothy Geithner's new TALF/PPiP/FDIC* plan, like all his other plans, seems designed to shovel billions into the coffers of the very same bankers who got rich on the mortgage bubble. When the public gets a glimpse of the tip of this giant iceberg, as they did with the AIG bonuses, they're dismissed as angry rubes who Just Don't Understand How Things Work. But his latest scheme is proof that they are absolutely right.

Despite Geithner's contention that banks are simply "burdened with bad lending decisions," most Americans understand at this point that there was serious fraud involved in the inflation of the mortgage bubble. The Justice Department and the FBI are currently investigating Countrywide for accounting fraud, insider trading and consciously lending money to people they knew couldn't afford to repay it. Meanwhile, AIG is suing Countrywide because they have to pay off hundreds of millions of dollars in insurance claims because Countrywide just flat out lied about the mortgages they were issuing:

Mar 24, 2009 at 4:54 PM | Registered CommenterDailyBail
(Dean Baker is co-director of the Center for Economic and Policy Research and the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy. Please welcome him in the comments -- jh)

Dean Baker released a paper last week on AIG, written for the Center for Economic Policy and Research. The words "must read" get bandied about with way too much freedom, but they certainly apply here. (You can find it here, or download it on PDF).

Points he raises:

• Did Geithner know about the AIG bonuses? Almost certainly:

This discussion is silly because Geithner almost certainly knew of the bonuses ever since the initial takeover on September 15th. He just didn't think they were important.

Mar 24, 2009 at 4:55 PM | Registered CommenterDailyBail
March 23 (Bloomberg) -- Within minutes, the yield on the 10- year Treasury note had plummeted 50 basis points, the most in 45 years.

And why not? The Federal Reserve announced last week that it would be purchasing as much as $300 billion of “longer-term Treasury securities” over the next six months, along with a total of $1.25 billion of agency mortgage-backed securities and $200 billion of agency debt this year.

There’s only one problem: If Fed chief Ben Bernanke is successful in his commitment to preventing deflation at any cost, buying 10-year Treasuries at 2.5 percent will turn out to be a losing proposition for investors.

Mar 24, 2009 at 4:56 PM | Registered CommenterDailyBail
China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Mar 24, 2009 at 4:57 PM | Registered CommenterDailyBail
By Lorraine Woellert

March 23 (Bloomberg) -- The U.S. Senate last month passed a measure limiting “luxury” spending for corporate travel by recipients of federal bailout funds. Two weeks later, about two dozen senators of both parties left town for political meetings on the Florida coast.

Hotel-industry leaders are seizing on those trips as ammunition in a campaign to get lawmakers and Obama administration to tone down the rhetoric against business travel, which they say is adding to their economic difficulties.

“It’s just the hypocrisy,” said Frank Fahrenkopf, a former chairman of the Republican National Committee who is president of the Washington-based American Gaming Association, one of the groups urging politicians to moderate the criticism. “We’ve got to have Washington stop beating up on us.”

Mar 24, 2009 at 4:58 PM | Registered CommenterDailyBail
By Mary Lu Carnevale

Sen. Bill Nelson, a member of the Senate Budget Committee, said the Obama budget will have to be revised in light of the latest Congressional Budget Office projections.

The Florida Democrat said in an interview on Fox News Channel this morning that “we’re going to have to go back and rework this whole thing, and that’s going to be done this week in the Budget Committee.” He later added that “Kent Conrad, our chairman of the Budget Committee, is definitely going to have to be Merlin.” CBO numbers released Friday show federal deficits over the next decade will exceed President Barack Obama’s projections by $2.3 trillion.

Conrad, a North Dakota Democrat, had warned on Friday that cuts would be forthcoming. “The reality is, we are going to have to make adjustments to the president’s budget if we want to keep the deficit on a downward trajectory,” he said.

So where does Nelson say the money is coming from? “You have to finagle with the numbers,” he said. “You want to keep on the three main themes of the president, which is the environment, health and education.”

Mar 24, 2009 at 4:58 PM | Registered CommenterDailyBail
William Black is not the guy you want to talk with for an hour and a half on a Friday night if you want to sleep well knowing all is right with the world. He's white-collar criminologist and former financial regulator who teaches at the University of Missouri-Kansas City School of Law, and he's written many of the canonical pieces on the role of mortgage fraud in the financial crisis. For starters, check out his Two Documents Everyone Should Read To Better Understand the Crisis.

I asked Bill here tonight for a couple of reasons. One, Rob Johnson told me to, and wise people always do what Rob says. Two, Geithner will be testifying before House Financial Services on re-regulation on Thursday. But mostly because, as we've been saying for a while, continuing to shovel more money into a broken financial system without regulating it first is a dangerous proposition. Other countries are extremely concerned about putting up more funds until the US fixes its banking system, and will certainly be aggressively pushing both Geithner and Obama about re-regulation at the upcoming G20.

Mar 24, 2009 at 5:00 PM | Registered CommenterDailyBail
But the Obama administration, like the Bush administration, apparently wants an easier way out. The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them. In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.

And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels. Mr. Paulson proposed having the government buy the assets directly. Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.

Mar 24, 2009 at 5:01 PM | Registered CommenterDailyBail
RBC Bank President Gordon Nixon - Salary $11.73 Million


I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.

There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

Phone or e-mail:
RBC President, Gordon Nixon, Toronto (416)974-6415
RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail to:greg.grice@rbc.com
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail to:brian.conway@rbc.com
RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail to:tammy.holland@rbc.com
RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail to:beja.rodeck@rbc.com
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail to:ombudsman@rbc.com
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail to:ombudsman@obsi.ca





"Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"
Mar 24, 2009 at 8:58 PM | Unregistered CommenterPaul Fraser
@ Paul

Good luck in your fight.
Mar 24, 2009 at 11:29 PM | Registered CommenterDailyBail
removed spam
Jun 23, 2009 at 10:04 AM | Unregistered Commenterromaeronsecam
"Discussion Of Bank Bondholders Vs. Taxpayers With ...."

Blah, blah, blah.

The time for "discussing" is WAAAAAaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaayyyyyyyyyyy past. NOW is a time for DOING.
May 14, 2010 at 3:52 PM | Unregistered CommenterRecoverylessRecovery

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